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Friday, October 8, 2010

Just how broke is Tri-Met?

Members of Portland's apoplectic transit-hater crowd find their heads spinning this week with the release of the troubled transit agency's latest audited financial statements. These documents confirm what people have been suspecting for months: that Tri-Met's finances have not been well managed, and the whole operation is careening toward disaster.

The most eye-popping revelation is that Tri-Met's unfunded liability for retiree health care benefits is now $816.5 million. That's up from $632.2 million a year ago. And hey, people, that's just to pay the retired employees' medical bills! It doesn't include the liability to pay them their pensions, which adds another $267.3 million in unfunded liabilities to the tally. Cha-ching! You math majors out there can see that the total unfunded pension and retiree health care liability is now approaching $1.1 billion.

And even that mega-number may be low. The actuaries who come up with these figures make all sorts of assumptions in predicting what the future will hold, including how much Tri-Met will earn on investments that it socks away to pay future benefits to these folks, and how much medical care is going to cost going forward. Some of the assumptions made in the current financials seem a bit, shall we say, optimistic. Such as:

Significant actuarial assumptions used in the valuation include a rate of return on the investment of present and future assets of 7.0 percent, an annual cost of living increase of 4.0 percent and annual salary increases of 5.0 percent....

Significant actuarial assumptions used in the valuation include a rate of return on the investment of present and future assets of 8.0 percent, a benefits in payment status annual increase of 3.0 percent, and a 3.0 percent annual rate to determine the normal retirement benefit for active employees....

Significant actuarial assumptions used in the valuation include a discount rate of 4.5%, and health care cost rates trending down from 10% in 2010 to 5% in 2020 for the major medical component, which is representative of the entire plan....

If you finding yourself thinking that you're going to make 7% or 8% on your investments, or that health care rates are going to "trend down," over the next decade, call Amanda Fritz for emergency psychiatric evaluation.

Another item that jumps out of these financials is that Tri-Met is apparently playing the same "interim financing" shell game that Portland uses when it goes out to borrow huge sums of money for "urban renewal" shenanigans. It authorizes "interim" financing of projects early on, before the public has any firm handle on what the project entails. While the jumbo "interim" loans are outstanding -- up to five years these days -- Tri-Met spends all the money. By the time it informs the public that it's going out for the permanent, long-term mortgage, the money's all been spent, the "interim" loan is due any day now, and it's way too late to say no to the long-term bonds.

We also see that Tri-Met is the tenant under several leases of office space out there, paying rent of about $1 million a year. This being Portland, one can only imagine how those properties are selected, and how the rents are set. Past or present proximity to Neil Goldschmidt is no doubt an important factor in that analysis.

In some ways, the timing of the bad money news works well for Tri-Met, which is currently begging voters for a property tax increase, supposedly to fund its current operations. On the other hand, the ugly balance sheet also reflects poorly on the agency's management, which has made some screamingly bad choices with the doomed WES commuter train to Wilsonville and a streetcar to nowhere on Portland's east side, and now proposes to double down with a mystery train to a place called Milwaukie.

Regardless of whether the voters are dumb enough to give the transit district its property tax, Tri-Met appears to have hit a financial iceberg. And its captain, Ted Fred Hansen, left an hour ago on a speed boat. The rest of you, go by streetcar!

Comments (35)

And now they have borrowed another 6 million to study light rail down Barbur, bringing their GANG train to folks there. Though a Dem I am voting for Dudley just so he can clean up these Boards like Tri-Met and the Port.

Even the federal Budget Office in it's calculations for ObamaCare has lower rate of return numbers than TriMets 7.0% and 8.0%. And several review agencies of ObamaCare don't predict health care costs "trending down from 10% to 5%". I guess TriMet knows more than they do, or any of us.

There are now a few TriMet board members that are beginning to question "prophecies" of the TriMet establishment. They better start asking more questions, with followup questions; and educate their fellow board members. And they can begin with Milwaukie LightRail, as they have done in that last two board meetings. Better yet, vote for Dudley and maybe the Board can we reconstituted with a majority that has common sense.

OK - this definitely shows gross incompetence but is there a criminal of civil element here that could result in legal sanctions? I am not an attorney, though I sometimes play one for grins. This, however, is well out of the areas of law that I am familiar with.

Btw the Colorado legislature passed a law that required Denver regional Transit agency to contract our a part of the work, These days, from what I have read, about 50% of the service is contracted out and the savings is about 25% on operating costs.

I'll let y'all do the research but someone might mention it to their local leg person.

Its not about hating transit but more of the way it's operated. If the riders paid for the capital outlay and 100% of the operating costs I would be all for public transportation. However, when they only pay 19% of the operating cost, not including paying any of the unfunded liability as you just pointed out, it clearly is not fair. I wonder what a ride really costs verses what the rider pays? If the rider had to pay the full cost would he/she find it a good value? It's all a shell game to promote government and union jobs to keep voting for the democrat machine. This all reminds me of the games they played when I lived in Chicago.

My mother used to sing a little ditty in response to family requests for one thing or another: "When the tax return comes!"

Of course it was a joke; the tax return couldn't begin to cover all of our needs.

People exercised this wishful thinking with Obama and Now I see normally rational people doing the same thing with Dudley.

I don't recall hearing that Tri-Met reform is at the top of his agenda or, indeed, if he will have the power to make any significant change in that agency during a first term other than to appoint his own cronies or donors to available board positions.

Road Work

Miles run year to date: 45
At this date last year: 117
Total run in 2016: 155
In 2015: 271
In 2014: 401
In 2013: 257
In 2012: 129
In 2011: 113
In 2010: 125
In 2009: 67
In 2008: 28
In 2007: 113
In 2006: 100
In 2005: 149
In 2004: 204
In 2003: 269